Markets & Finance

Nokia, SAP Fall on Results

July 20, 2005

From Standard & Poor's European MarketScope\

Nordics

Nokia was down €1.29 to €13.41 after its second-quarter results disappointed. The mobile-phone giant posted second-quarter pre-tax profit of EUR1.11 billion, operating profit of €1.0 billion and sales up 25% year over year to €8.1 billion. Earnings per share landed at €0.18, lower than the €0.20 expected. Looking forward, the company expects phone prices to slide. It sees third-quarter sales rising to €7.9 billion to €8.2 billion, compared to €7.1 billion in the same period a year ago. In the future, the company will no longer give sales or earnings per share guidance in announcements.

Mobile phone networks company Ericsson was up 0.60 Swedish kronor to 26.90 kronor, as the broker Dresdner Kleinwort Wasserstein said the company's second quarter results broadly met its expectations. It noted that pre-tax profit and operating income were only a whisker short of its estimates, while revenues of 38.444 billion kronor beat its forecast by 1.5 billion. The broker maintains its strong buy recommendation with 46 Swedish kronor target.

Germany

Software giant SAP was down €1.99 to €145.54 as the company reported second-quarter sales at €2.02 billion compared to €1.9 billion expected. License revenue came in at €576 million, compared to €555 million expected. The company saw a 13% decline in domestic license revenue but predicts a recovery of the business in the second half, and reiterated a target for license sales to rise 10% to 20% this year. The company also reiterated its 2005 outlook and continues to gain market share, extending leads in the U.S. The bank Merck Finck said that it is worried about the 13% year on year decline in German software revenues and the 11% year on year decline (currency-adjusted) in Japanese software revenues.

Drugmaker Merck was down €2.84 to €66.44 as the company reported second-quarter net income fell 32% to €248 million, compared to €363 million from the year ago period. Expectations were for profit to be around €233 million. The company's earnings, not including one-time gains, amounted to only about 50% of that generated in the second quarter of 2004. The company reiterated its forecasts for single-digit revenue growth this year. It did not provide earnings targets. Sales rose 8.6% to €1.48 billion, higher than forecast.

The conglomerate Siemens was up €0.85 to €65.25 after Credit Suisse First Boston previewed third-quarter group sales of €18.8 billion, operating profit of €1.1 billion and basic net income of €680 million. The brokerage Cheuvreux said third-quarter results are expected to show group sales probably up 8%.

Carmaker Volkswagen was up €0.56 to €42.14 after the FAW Group, which the first half after cutting costs and boosting car sales.

French

Food maker Danone was down €3.40 to €89.25 as the company reported first-half sales of €6.43 billion, up 6.5%, and operating income of €857 million. The company expects full-year like-for-like growth of between 6% and 7 and growth in underlying earnings per share from continuing activities of approximately 10%. Separately, the company said that it has received no contact from a potential buyer, according to the newspaper Les Echos. Meanwhile, the brokerage Cheuvreux increased its target to €110 from €82 and reiterated an outperform rating, assuming a takeover bid. The broker Fideuram Wargny downgraded the company to reduce from hold, saying it offers no more catalysts.

Societe Generale was up €1.30 to €90.45 as the company is considering a bid for Turkey's Garanti Bank, according to the newspaper Les Echos. Garanti is Turkey's third-largest private bank, with some 5 million clients. It is valued at around €5 billion. According to the daily, General Electric, Deutsche Bank and ABN Amro are also interested in Garanti. All envelopes should be in by August 2.

Drugmaker Sanofi-Aventis was up €0.90 to €71.00 as the company plans to increase its influenza vaccine production capacity, building a facility in Swiftwater, Pennsylvania. The costs of the plant are estimated at $150 million and it is expected to be finished by fiscal-year 2009.

Italy

Banca Antonveneta was down €0.70 to €25.80 after JP Morgan reduced its 2005 to 2006 earnings per share forecasts for the company by an average of 4% to €1.56 from €1.60 in 2005 and to €1.76 from €1.86 in 2006. Separately, Dutch group ABN Amro confirmed that the acceptance period of its offer for the entire share capital of the company will end tomorrow. ABN Amro will announce the final number of shares tendered to its offer on 25. Meanwhile, Banca Populare Italiana's bids for the company commenced yesterday and conclude August 24.

Netherlands

ABN Amro was up €0.25 to €21.38 after the company confirmed that the acceptance period of its offer for the entire share capital of Banca Antonveneta will end tomorrow. Meanwhile, BPI's bids for Antonveneta commenced yesterday and will conclude on August 24. Yesterday, the newspaper Het Financieele Dagblad named the company as an interested party in the potential takeover of Turkish Garanti Bank. The broker Kempen believes that, based on the size and scope of the Turkish banking market and Garanti Bank's position within that market, ABN Amro could be seriously interested.

Britain

Miner BHP Billiton was up £0.09 to £7.81 after signing a joint-venture agreement with Japan's JFE Steel and its existing partners, Itochu Minerals & Energy of Australia and Mitsui Iron Ore Corporation, which will secure long-term sales contracts worth approximately $4.3 billion.

Household products maker Reckitt Benckiser was up £0.31 to £16.57 ahead of its second-quarter of 2005 results on Monday. Credit Suisse First Boston is expecting 6% organic revenue growth and a 7% increase in net profit to £136 million. The broker noted that a key area of focus will be the company's margin and rated the company outperform.

Standard Chartered bank was up £0.21 to £11.26 after China announces it will no longer peg its currency to the U.S. dollar, replacing it instead with a basket of currencies.

Switzerland

Roche was up 2.20 Swiss francs to 174.30 francs after the bank UBS lifted its target to 200 francs from 182 francs as it reiterated a buy rating. Credit Suisse First Boston also increased its target to 188 francs from 150 francs, confirming its buy rating. Lehman Brothers moved to 156 francs from 153 and stuck to its equalweight rating. The broker moves followed solid first-half numbers yesterday and an increase in drugs sales guidance.